The Elements Of Retail Banking Marketing Essay

Published Date: 23 Mar 2015

The banking industry like many other financial services industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition, and more demanding customers; and the changing climate has presented an unprecedented set of challenges. In the current circumstances a question arises whether the customers are satisfied or not and what are

the elements of retail banking which lead to the satisfaction or dissatisfaction of customers. The knowledge of current levels of satisfaction and, in particular, the primary factors of satisfaction are beneficial to those in the industry, thereby allowing them to focus and further strengthen the key areas that lead to highly satisfied customers. This research postulates on the present levels of satisfaction, and also tries to explore the factors that lead to customer satisfaction in retail banking in India. Data from 100 survey respondents were collected from one branch of one of the prominent retail banks in the city of Hyderabad. The findings revealed that customer satisfaction, a transaction-specific attribute is dependent on seven factors, which concur with extensive academic literature.

INTRODUCTION:

Customer satisfaction is an evaluation by the customer, after buying goods and services. The most time-honored view of customer satisfaction in the academic world is that customer satisfaction is the judgment assumed out of the comparison of pre-purchase expectations with post-purchase evaluation of the product or service experience (Oliver, 1997). Customer satisfaction can result from any factor (it mayor may not be quality related) and its judgments may take place from non-quality issues (e.g., needs, equity, and perceptions of 'fairness') and require experience with the service or service provider (Howard and Sheth, 1969; and Taylor and

Baker, 1994). Furthermore, a basic precept of marketing is that customer satisfaction with a product will possibly lead to repeat purchases, acceptance of product line extensions, and favorable word-of-mouth advertising (Cardozo, 1965). Customer satisfaction is widely recognized as a key pressure in the formation of consumers' future purchase intentions (Taylor and Baker, 1994). In today's highly competitive, increasingly consolidated world, offering personalized and differentiating services can be critical to a bank's success. Customer satisfaction is one of the most significant factors for the profitability of retail banking in India. It calls for the retention of customers for the long term, which is more economical than attracting new customers (Reichheld and Kenny, 1990). In the current circumstances of retail banking in India particularly with banks becoming larger, the closure of branches and the widespread use of internet banking, the issue arises whether the customers are satisfied or not and what are the

rudiments of retail banking which lead to the satisfaction or dissatisfaction of its customers. The knowledge of current levels of satisfaction and, in particular, the primary factors of satisfaction are beneficial to those in the industry, thereby allowing them to focus and further strengthen the crucial areas that lead to highly satisfied customers. Previous results have emphasized that in-branch factors and, in particular, staff, branch location and convenience are the most noteworthy factors that have some bearing on customer satisfaction in retail banking. The banking industry like any other financial services industries is facing a market that is rapidly changing; new technologies being introduced, fear of economic uncertainties, fierce competition and more demanding customers and the changing climate have presented an unparalleled set of challenges (Lovelock, 2001). Banking, being a customer-oriented services industry, the customer is the centre of attention and customer service has to be the distinguishing factor. The challenge for banks is to lower costs, increase efficiency, while improving the quality of their service, and increase customer satisfaction. Attention has now turned to improving the quality of service encounter, when customers enter the bank and come into face-to-face contact with bank staff (Chakravarty, 1996). The Indian banking industry has undergone a sea change in its operations

since post independence. Furthermore, liberalization, unwrapping up of the economy in the 1990s and the government's pronouncement to privatize banks by reduction in state ownership has culminated in the banking reforms, based on the recommendations of the Narasimha Committee. After the entry barriers were lowered and the product lines blurred of banks and non-banks, since the financial sector reforms, banks are carrying out their operations under competitive pressures originating from within the banking system, from non-banking financial institutions, and from the domestic and international capital markets. This has led the Indian

banking industry to sail through difficult times. In such trying times of mature and intense competitive pressures, it is very important that banks retain a loyal base of customers. In order to achieve this and improve their market and profit positions, many retail banks are targeting their strategies and policies towards increasing the satisfaction levels of their customers and building upon their loyalty through improved service quality.

Need and Relevance of the Study

The retail bank studied here has recently undergone a re-branding exercise. This gives rise to the need for a study to measure the levels of satisfaction of its customers. The recessionary trends being felt at present will also have a significant impact on the satisfaction levels as well as on factors of satisfaction. The main concern of the study is to provide information that would help the management of the bank to evaluate and re-design its current marketing strategies in order to retain its existing customers and to attract new ones in today's competitive environment. Furthermore

This study is based on the assumption that patronages of a bank depend on the degree of customer satisfaction.

Objectives/Problem Definition

The objectives of the study are as follows:

• To measure the level of satisfaction of retail banking customers.

• To identify the factors of customer satisfaction in retail banks.

Scope of the Study

The scope of the study are:

• The study is specific only to retail banking in India.

• The study also relates to customer satisfaction and its related factors.

The factors studied are:

- Service provided by the bank

- The image or personality of the bank

- Convenience provided to the customers

- Pricing policies of the bank

- Maintenance of relationship with the customers.

Literature Review

Customer satisfaction is of great significance for most marketers and consumer researchers, be it for theoretical or for practical usage. It has become a corporate goal as an ever increasing number of organizations are making every effort to improve the level of quality in their products and services. In the words of Oliver (1981, p. 27), customer satisfaction is "the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer's prior feelings about the consumption experience." Customer satisfaction has also been defined by Hunt (1977, p. 459) as "an evaluation rendered that the (consumption) experience was at least as good as it was supposed to be." Furthermore, Engel and Blackwell (1982, p. 501) have opined it to be, "an evaluation that the chosen alternative is consistent with prior beliefs with respect to that alternative." Thus it can be said that customer satisfaction is a judgment by the customer after the purchase has taken place. Satisfaction is the consumer's contentment response. It is a considered opinion that either a product or service feature, or the

Product or service itself, endows with a pleasurable level of consumption-related fulfillment.

It is a well researched fact that investments in customer satisfaction, customer relationships and service quality leads to profitability and market share (Rust and Zahorik, 1993). Furthermore, customer satisfaction leads to customer loyalty and this also leads to profitability (Hallowell, 1996). If customers are satisfied with a particular high quality service offering after its use, then they can be expected to engage in repeat purchase and even try line extensions and thus, market share can be improved. Levesque and McDougall (1996) have empirically confirmed and reinforced the notion that poor customer satisfaction leads to a decrease in the levels of customer satisfaction and the chances of further willingness to recommend the service (i.e., word-of-mouth advertising or referrals) is lessened. Besides, costs of customer acquisition are much higher than costs of retention (Reichheld and Sasser, 1990).

A review of the existing literature indicates that there can be, in all probability, a large number of antecedents of customer satisfaction as the facets underlying satisfaction judgments are global rather than specific (Rust and Oliver, 1994; and Taylor and Baker, 1994). Nevertheless, some researchers make out a case that customers tend to develop norms for product performance on the basis of general product experiences and these, rather than expectations from a brand's performance, influence the confirmation/disconfirmation process (Cadotte et al., 1987). Thereafter there are arguments that, over and above the cognitive factors, satisfaction judgments are also reliant upon affective components, given the fact that both exist together and make independent contributions to the satisfaction judgments. Previous researches have shown strong linkages between service quality dimensions and overall customer satisfaction (Anderson and Sullivan, 1993). Service quality is accepted as one of the basic factors of customer satisfaction (Parasuraman et al., 1994). However, there is much debate whether customer satisfaction is a precursor of service quality judgments (Parasuraman et al., 1985; and Bitner et al., 1990) or the other way round (Anderson and Sullivan, 1993; and Taylor and Baker, 1994). Definitive analysis has showed that service quality cannot be divorced from the concept of customer satisfaction. Recent studies have shown that satisfaction is influenced by not only perceptions of service quality but also by perceptions of product quality, and pricing factors as well as situational and personal factors (Zeithaml and Bitner, 2000). For example, customer satisfaction with retail banking will be a broader concept and will certainly be influenced by perceptions of service quality but will also include perceptions of product quality (such as variety of deposit options available to customers), price of the products (i.e., charges charged by the bank or rates offered by the banks on various deposits), personal factors such as the consumer's emotional state, and

even uncontrollable situational factors such as weather conditions and experiences in conveying to and from the bank.

Customer Satisfaction and Retail Banking

Retail banking is a service industry which is focused towards the customer's money and its management. A relationship of the nature of members is involved in this industry due to its continuous nature. An element that strongly drove the satisfaction of customers in the banking

sector was the conviviality factor related to the features of a bank and the attributes of its personnel (Rust and Zahorik, 1993). Krishnan et al. (1999) conducted a study and put forward that satisfaction with perceived product quality was the prime driver of overall customer satisfaction. Furthermore, their study also found and recommended that the impact of service delivery factors varies considerably on customer satisfaction. To further exemplify, they became aware of the fact that for customers who traded heavily and had high investable assets, the effect of an automated telephone service was elevated than that of the other drivers of satisfaction.

In another research, Hallowell (1996) looked into the relationship between customer satisfaction and loyalty and his conclusions were quite analogous to Parasuraman et al. (1994). The study concluded that satisfaction with the service, and satisfaction with price were elements in the overall satisfaction measurement. The measurements used in the above mentioned study were reasonably all-inclusive, and finally concluded that all the elements measured had a bearing

on overall satisfaction. The findings of the study emphasized that the service features of branch, staff and information to be dominant factors.

Johnston (1997) promoted the notion that banks in general were to all intents and purposes, 'barking up the wrong tree' by enhancing service quality and these efforts in turn had little or no effect on improving customer satisfaction. The study (Johnston, 1997) suggested that satisfaction or dissatisfaction with retail banking did not arise from the same factors. To be more precise, some elements of service quality, if improved, enhance the satisfaction levels of the customers, while on the other hand, other elements may not improve satisfaction but simply function to

keep dissatisfaction at bay or at best, reduce dissatisfaction alone. This line of accepted wisdom stems from the hygiene factors of Herzberg's motivation theory. Levesque and McDougall (1996) exhaustively explored the consequences of service quality, service features and customer complaint handling on customer satisfaction in the Canadian retail banking sector. Based on their empirical analysis, they have suggested that the determinants of satisfaction in retail banking are

Driven by a number of factors and also included service quality dimensions.

The service provider's offering can also be expected to affect customer satisfaction (overall) and have a strong bearing upon ongoing patronage. The study concluded that the bank's features (e.g. location), the competitiveness of the bank's interest rates, the customers' judgments about the bank employees' skills and whether the customer was a borrower, were among a few other factors that drove customer satisfaction. Reichheld and Sasser (1990) have recognized the benefits that customer satisfaction provides by the retention of customers of a bank. They advocated that the longer a customer stays with a bank, the more utility the customer generates. This is based on a number of factors that relate to the amount of time a customer spends with a bank. These included a high preliminary cost of introducing and attracting a new customer, increase in both the value and amount of purchases, the customer's better understanding of the bank, and positive word-of-mouth promotion. A study conducted by Bloemer and Kasper (1995)

researched how satisfaction, image and perceived service quality determined loyalty in a retail bank.

Sample Design

The selected respondents represented a balanced mix of various demographic factors (age, gender, marital status, education levels, employment status and income groups). A total of 100 respondents were randomly administered the questionnaire from among those visiting a specific branch of the AXIS Bank. The questionnaire was self-administered by the researcher. It has been suggested that a study designed to reveal factor structure should have more observations than variables and the minimum absolute sample size should be 50 observations.

Method Data Collection

For the current study responses were gathered from the customers of one of the most prominent retail banks of India. The bank has been recently re-branded and has a strong and significant retail presence and has been named as AXIS Bank . One branch of the bank was randomly selected for the study. The study was conducted in Ludhiana, a metropolis and the Industrial Area, large and diverse population.

A one-off cross-sectional quantitative research has been adopted for this research. A survey questionnaire to measure the relationships between the variables of this study and collect demographic characteristics of the respondents has been designed. In order to gain objective views and guard against faulty assumptions and detect flaws in the questionnaire, consultation with experts and pilot tests have been performed.

A 5-point interval Likert scale to examine how strongly respondents agree (5) or disagree (1) with statements to measure variables in the hypotheses of this research has been used. Existing established measures have been modified and adopted for this study (Churchill, 1979). Validity and reliability tests of the measures of the questions in the survey questionnaire have been conducted for valid and reliable data to be analyzed correctly to reveal meaningful findings

Method of Data Analysis:

There are various methods for Data Analysis but the method which is best suited to my research is FACTOR ANALYSIS, KMO & BARTLETT'S TEST .

Estimated time required for Research:

The estimated time required for my research is at least one month.

Estimated Cost: The estimated cost of my research is Approximately Rs3000.it includes the following;

1.Transportation cost

2.food and snacks

3.Stationary

4.miselleneous